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I want my property back!

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After years of economic depression, the climate is finally improving. The sites that you’ve been happy to hold onto and eke out a rental stream on short term flexible tenancies are no longer enough to satisfy you. The time has come to redevelop these sites and unleash their economic potential.

It seems as though you are likely to have no issue with planning, there are tenants interested in your plans and your funders and management are behind you. There’s just one problem – your existing tenants are quite happy where they are … but surely you can just terminate their leases at the end of the term can’t you … ? 

But my tenant wants to stay…

The Landlord & Tenant Act 1954 (‘54 Act) allows a tenant to request a new lease at the end of the current lease term. The terms for the renewal lease are usually the same as the original lease with the rent being the market rate.

You may be fortunate and have ‘contracted out’ of the ‘54 Act. Therefore, the lease will come to an end on the expiry of the term and you can take steps to take back the property if the tenant refuses to move out.

If, however, the lease does attract ’54 Act protection, then you may still stand a chance of successfully opposing a renewal lease if the tenant has defaulted on its lease obligations by (for example) failing to repair or failing to pay rent.

If not, then you’re only able to object to the new lease on limited grounds, the most common being that you want to take occupation yourself or (as in this scenario) that you are going to redevelop the property. However, in relation to any of these ‘no fault’ grounds, compensation is payable to the tenant, the amount being calculated based upon a multiple of the rateable value of the property.

Make sure your plans are concrete

It might seem tempting when you are desperate to obtain vacant possession of the property to state the ‘redevelopment’ ground, even though you are not entirely sure that the redevelopment will go ahead or what your plans are. However, you should exercise extreme caution in taking this approach! The tenant can claim compensation on misrepresentation or concealment of material facts, and therefore you need to be clear on the reasons and timings of any redevelopment or intention to occupy and if this changes it would be wise to inform the tenant. The ground of redevelopment should only be relied upon if the project has ‘moved out of the zone of contemplation…into the valley of decision’[1].

In a recent case [2], the importance of the process of opposing a lease renewal and strategies adopted by a landlord was highlighted. Saturn was in occupation of the premises but agreed to vacate for a payment of £150,000 on the basis that demolition was due to take place within 2 months of them giving up vacant possession. The Council did not demolish the buildings for over 3 months and Saturn then commenced proceedings for misrepresentation to claim compensation.

In this case, the claim was dismissed on the ground that there was no tenancy and Havering had stated demolition would only occur if it was held there was a tenancy. However, it is easy to see the court considering otherwise where a genuine tenancy had been created and Havering may have been liable to pay compensation to the tenant due to its representation that demolition would take place within a specified time.  

Communication is key!

Although Saturn was unsuccessful in obtaining compensation for misrepresentation due in large part to there being no tenancy in place, consider by way of contrast a 2009 Court of Appeal case [3]. The landlord served a notice with an intention to redevelop the land but due to several factors changed its timings on the redevelopment and did not communicate this to the tenant. As a result the Court found in the tenant’s favour and awarded compensatory damages of £48,000.

When dealing with opposed lease renewals, you should always be clear on your intentions and let the tenant know if anything changes – or you could be ordered to pay the tenant compensation for misrepresentation or concealment of facts.

[1] Cunliffe v Goodman [1950] 2 KB 237

[2] Saturn Leisure Ltd v Havering London Borough Council [2014] EWHC 3717 (Ch)

[3] Inclusive Technology v Williamson [2009] EWCA Civ 718

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